Disability recipients generally receive a small (positive increase) cost of living adjustment (COLA) to their benefits, if any, at the beginning of each year. The purpose of COLA is to ensure that benefits are not negatively impacted by inflation. It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The yearly increase is determined by the Bureau of Labor Statistics in the Department of Labor. Each year the Burau of Labor and Statistics measures the average change over time in the prices many people pay for goods and services. According to Social Security, in the year of 2013, nearly 62 million Americans benefits increased to 1.7%.
The government has been calculating COLA for more than a decade through a chained consumer price index for all urban consumers (C-CPI-U). The COLA program is now determined the CPI that measures prices for urban wage earners and clerical workers (CPI-W) as stated above. The CPI-W measures price changes but does not assume that people change their buying habits in response to those changes. The chained CPI, by contrast, assumes consumers change their purchase habits when prices rise—substituting cheaper cuts of meat, for example, or switching to generic store brands from more expensive branded items, or just buying less. The Bureau of Labor Statistics (BLS) calculates that the chained CPI has risen an average of just under three-tenths of a percentage point less each year than the CPI-W during the past decade. The agency does not make projections of future changes. The Congressional Budget Office in 2011 forecast that the C-CPI-U would cause the Social Security COLA to rise during the coming decade by a quarter of a percentage point less each year than it would using the CPI-W.
You do not need to ask Social Security about COLA increases, the amount is automatically applied to your monthly benefits. However, often times if you are receiving Medicare, the premium for medical coverage may increase during this time. Unlike the Social Security COLA, the CPI-W plays no part in the computation of the Medicare Part B premium. The Medicare Part B premium changes each year, if necessary, so that the Part B premium is sufficient to fund approximately 25 percent of the projected cost of the Part B program. Any such premium change is effective in January.
